If you follow the financial press, you may have noticed a raft of articles announcing that, at the current oil prices, Saudi Arabia will have run out of money by 2020. This was a reaction to a release of an IMF Economic Outlook report on the Middle East and Central Asia. You can view a short video summary here.
As often happens with these sorts of attention grabbing headlines, the fine detail has been lost. The IMF identifies the ongoing development of the private sector as key in reducing Saudi’s reliance on oil.
While all countries struggle with the transition from relying on mineral resources income to a more sophisticated economy, the Saudi Government has been consciously working towards this transformation for some time. They have been funding education programmes in both Vocational and Higher Education to diversify the skill base.
The Saudi Government is also attempting to attract a range of industries to establish in Saudi, and has established a number of agencies to attract investment into the Kingdom. A very successful agency has been the Royal Commission for Jubail and Yanbu. Established in 1975, the agency has assisted in the creation of over 233 industries that have invested over 244 billion Riyal, providing employment for over 107.000 workers.
Ai Group and the Australian Saudi Business Council visited the Commission on our Trade Mission to the Kingdom in April this year (see photo).
The Ai Group/ASBC Delegation meeting with the Royal Commission of Jubail and Yanbu in April 2015; the gentleman in the gold robe is His Highness Prince Saud Bin Abdullah Bin Thunyan AL Saud, the Chairman of the Royal Commission
Saudi Arabia has a fast-growing and young population, a well-managed banking system, good infrastructure, and generally low import duties and barriers. Its business community is sophisticated and is very familiar with Western practices. Saudi Arabia’s needs are well suited to Australian capabilities. Australians enjoy a good reputation in the Kingdom for competence and tolerance.
While some Government projects may slow down as decisions are being made on spending, we still see the fundamentals as making sense for companies with the right product at the right price.